Capitalogix

The Gig Economy: Uber's Woes

I enjoy looking at great disruptive companies and great examples of industries that are primed for disruption.

Think about how many companies have failed due to myopia... Radioshack couldn't understand a future where shopping was done online and Kodak didn't think digital cameras would replace good ol' film. Blockbuster couldn't foresee a future where people would want movies in their mailboxes, because "part of the joy is seeing all your options!" They didn't even make it long enough to see "Netflix and Chill" become a thing. 

The Taxi industry had been ready for disruption way before Uber came along, yet, Uber may have mismanaged their opportunity. Taxis now have a chance to innovate back. 

To run a taxi in New York you need a medallion. There are approximately 13.5 thousand medallions in NYC. In 2013, prices peaked at over 1.3 million dollars for a single medallion. 

The medallion system has been broken for a long time. NYC taxis, in particular, were corrupt and the prices of medallions were artificially inflated by Bloomberg and de Blasio, and built on a debt bubble.

Taxis offered mediocre service, high rates due to artificial caps/greed, and often didn't take credit cards.

They didn't adapt and got disrupted. It's an age-old tale. The same tale as Blockbuster or Kodak; companies thinking linearly in an age of exponential change. 

Taxi agencies had the infrastructure to edge ridesharing out and adopt friendlier policies but were slow to adopt the apps and convenience that modeled ridesharing.

 

via chartr

It's clear that there's an increased demand for rides. Increased demand is likely caused by access in places that didn't previously have enough demand for a full taxi-service. Ridesharing means you can have drivers in small towns, rural areas, etc. Almost all the new demand is being monopolized by ridesharing. 

Should it be, though?

Many would argue Uber's model isn't sustainable; neither are many of these gig-based companies like DoorDash. Uber has a product almost everyone uses, no inventory, very little staff, and despite "winning" the race, it lost $370 million in 2018 and $4.5 billion in 2017.

 

They gained market share by offering lower prices (even at a loss). They also incentivized an army of drivers to join based on flexible hours and side-income.

 

The road to profitability for these companies is uncertain.

 

And the public opinion of Uber is dropping. You have drivers taking out loans to lease cars. You have California making uber classify their workers as employees. You have a review of 14,576 rides showing that these companies take a much larger slice of their drivers' fares than they purport.

 

Uber's low prices got it here, but prices have slowly raised, and AB5 in California has passed, though Uber is claiming exemption - it's likely their prices will jump again if forced to comply.

 

Rideshare companies are trying to convince workers that hour flexibility is worth the non-employee status, but I don't think that has any real basis. Gig workers can't unionize, have little labor protection and don't receive benefits.

 

The industry is in a period of massive disruption - but taxies have a chance to fight back. As the gig economy becomes regulated, the already defined system may regain an edge.

 

In the game of disruption, Uber was shortsighted. In the game of knowing their customers, Taxis were shortsighted.

 

Will taxies see a resurgence as Uber inevitably hikes up rates? Will autonomous fleets put drivers out of business as they will for long-haul freight?

 

Time will tell!

 

Onwards!

Here Are Some Links For Your Weekly Reading - September 15th, 2019

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

 

• New Blood Test Accurately Predicts When People Will Die within 5-10 Years. (BigThink)
• What Brain Supplements Can and Can't Do, According to a Neuroscientist. (FastCompany)
• The No. 1 University in America Now Comes with a Total Sticker Price of Over $293,000. (MarketWatch)
• Tim Cook Used a Specific Communication Strategy in Apple's iPhone Keynote. Here's Why Every Public Speaker Should Too. (Inc)

 

Trading Links:

• Counting on a Black Swan Event? There's an ETF for That. (Bloomberg)
• Jack Ma Ends 20-Year Reign at Alibaba with $41.8 Billion Net Worth. (Fortune)
• China's New Digital Currency Could Encourage Worldwide Use of the Yuan, Says CEO. (CNBC)
• The US Deficit Topped $1 Trillion. the Year's Not Even over Yet. (CNN)
• Trashing Fed 'Boneheads,' Trump Calls for Central Bank to Cut Interest Rates to 'ZERO'. (Politico)

 

(Re)Inventing The Wheel

When I think about the invention of the wheel, I think about cavemen.  But that isn't how it happened.

Lots of significant inventions predated the wheel by thousands of years.  For example, woven cloth, rope, baskets, boats, even the flute were all invented before the wheel (and apparently not invented by cavemen).

While simple, the wheel worked well (and still does).  Even now, the phrase "reinventing the wheel" is used derogatorily to depict needless or inefficient effort. But how does that compare to sliced bread (which was also a pretty significant invention)?

Despite being a hallmark of innovation, it still took more than 300 years for the wheel to be used for travel.  With a bit more analysis, it makes sense. In order to use a wheel for travel it needs an axle, and it needs to be durable, and loadbearing, requiring relatively advanced woodworking and engineering. 

 

 

All the aforementioned products created before the wheel (except for the flute) were necessary for survival.  That's why they came first. As new problems arose, so did new solutions.

Necessity is the mother of invention. 

Unpacking that phrase is a good reminder that inventions (and innovation) are often solution-centric. 

Too many entrepreneurs are attracted to an idea because it sounds cool. They get attracted to their ideas and neglect their ideal customer's actual needs. 

If you want to be disruptive, cool isn't enough. Your invention has to be functional, and it has to fix a problem people have (even if they don't know they have it.) The more central the complaint is to their daily lives the better.  

 

Henry Ford famously said: “If I had asked people what they wanted, they would have said faster horses.”

Innovation means thinking about and anticipating wants and future needs.

Your customers may not even need something radically new. Your innovation may be a better application of existing technology or a reframe of best practices. 

Uber didn't create a new car, they created a new way to get from where you want with existing infrastructure and less friction.

What Does The Average NFL Player Look Like (By Position)

Football season is officially underway! In honor of that, here's a look at each position's composite player!

As you might expect, different sports have a different ratio of ethnicities. For example, you might expect more Pacific Islanders in Rugby or Asians in Badminton.

The same is true for different positions on a football team.  Apparently, offensive linemen are more likely to be white while running backs are more likely to be black. 

Here is a visualization that shows what happens when you average the top players' faces in various positions?

osmutiar via Reddit

Composites are interesting.

While you may be thinking "this player must be unstoppable" ... statistically, he's average.

The "composite" NFL player would be the 848th best player in the league. He's not a starter, and he plays on an average team. 

We found the same thing with our trading bots.  The ones that made it through most filters weren't star performers.  They were the average bots that did enough not to fail (but failed to make the list as top performers in any of the categories).  The survivors were generalists, not specialists.

In an ideal world, with no roster limits, you'd want the perfect lineup for each granular situation. You'd want to evaluate players on how they perform under pressure, on different downs, against other players, and with different schemes. 

That's what technology lets you do with algorithms. You can have a library of systems that communicate with each other ... and you don't even have to pay their salary (but you will need data scientists, researchers, machines, data, alternative data, electricity, disaster recovery, and a testing platform).

You won't find exceptional specialists if your focus is on generalized safety. Generalists are great, but you also have to be able to respond to specific conditions.

Onwards.

Here Are Some Links For Your Weekly Reading - September 1st, 2019

 

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

• Google and Amazon Use Smart Speakers for 'Surveillance,' Top Tech Investor Says. (Finance)
• Streaming TV is about to Get Very Expensive Here's Why. (TheGuardian)
• Professional Video Game Player Signs Deal with Adidas. (CNW)
• Giant Virus Has Evolved Its Own Kind of CRISPR to Destroy Invaders. (NewScientist)
• Pole-Dancing Robot Strippers' to Perform Next to Human Dancers on Stage at Nightclub. (TheSun)

 

Trading Links:

• Surprise, Surprise, Warren Buffet Was Right: Machine-Managed Investment is a Better Bet. (Forbes)
• How ETFs Swallowed the Stock Market. (Wall Street Journal)
• Do We Really Want a Microsoft of Marijuana? (New York Times)
• Businesses Can Now Claim Their Trademark Blockchain Domains, Before It's Too Late. (Finance)
• Ray Dalio Warns of 'Serious Problems' and a Bond 'Blow-off' as a Repeat of the Late 1930S Looms. (CNBC)

 

 

Measuring Normalized Behavior – Stop Worrying and Love The Pain

When your doctor tells you that you are fat, it is easy to discount (because you pay them to tell you that).  When your massage therapist tells you that you are getting fat, you've got to listen (because they're trying to be nice to get a better tip).

Well, for the past two months, I've been getting back into fitness.

I used to be a competitive athlete.  In the past, for me, exercise was about gaining an edge and competing better.  In a sense, that is still true (just on a different field).   Now, I work out to stay healthy, fit, and vital while managing the challenges of running a company, navigating an overbooked calendar, and traveling every week.

In my last post on mindset and action, I talked about the habit of conditioning yourself to take the next best step.

This is about focusing on the right things so you can best measure progress.

 

 

Normalizing your habits and picking the right metrics isn't just a habit for the gym.  It's a habit you should pick up in life. If you don't set the right measuring stick you'll always be unhappy or underperform. 

Plan forward – but measure backward ... you have to make sure you're not so focused on the horizon that you don't track what you've accomplished. 

Normalizing the result makes this easier and better.

In running, for example, it is the time it takes me to finish one mile, while never going above 170 heartbeats per minute.

Meanwhile, in trading, we do this by comparing different opportunities based on a constant risk level (for example, the expected return for the next day of $1M, assuming a 2% maximum drawdown).  It doesn't matter what market we trade, or how many trades the system makes ... we can make a fair comparison and get better insights about performance.

Hope that helps.

Here Are Some Links For Your Weekly Reading - August 25th, 2019

 

Here are some of the posts that caught my eye recently. Hope you find something interesting.

 

Lighter Links:

• How to Take a Moneyball Approach to Business Data and Analytics. (TechRepublic)
• The Best Books on Philosophy of Technology. (FiveBooks)
• Explainer: What is Quantum Machine Learning and How Can It Help Us? (The Conversation)
• Most Top AI Researchers in the U.S. are Foreign. (Axios)
• Alien Life on Exoplanets May Be 'More Abundant and Active' Than on Earth, Say Scientists. (Forbes)

 

Trading Links:

• Burgundy Wine Investors Have Beaten the Stockmarket. (Economist)
• Bonds are the Most Expensive They've Been in 64 Years. Here's What That Means for Your Portfolio. (Fortune)
• What is High-Frequency Trading and How Does It Work? (TheStreet)
• The CEOs of Nearly 200 Companies Just Said Shareholder Value is No Longer Their Main Objective. (CNBC)
• Bugatti is Making Only 10 of these $9 Million Supercars. (CNN)

What Are The Most Important Issues Facing The U.S. Today?

According to a Gallup poll, these are the most important issues facing the U.S. today. 

via Statista

In July, immigration topped the list, presumably by people on one side of the political spectrum, followed by the government (likely by people on the other side of the spectrum). 

Surprisingly to me, the economy and the trade war were nowhere to be found. 

Whether or not we have to worry, they seem fairly germane issues. I started writing an article on yield curves and the fear of recession before realizing our Chief Investment Officer, John DeTore, was already writing his own letter on it. So, I'll deal with some of the surrounding issues here.

To start, the U.S. imports nearly 4.5x what it exports to China. 

via howmuch

While the USA's GDP is the highest globally, China is gaining quickly. 

Meanwhile, China is still the biggest holder of U.S. debt – and is currently allowing the Yuan to weaken to try and make its products more competitive and offset tariffs. 

It feels like we're losing some ground.  But, everybody seems to feel that right now.  The next chart shows that sentiment about the economic situation has been globally gloomy.

 

via Statista

Everything seems different, yet everything seems the same.  Markets tend to climb a wall of worry before falling off a cliff ... and then repeating the cycle.

Trends continue until broken.

Seems like a time for caution.  But, historically, times like these seem to have great opportunities hidden in them. 

Onwards!

World's Smallest Computer

Just saw this and thought it was worth sharing.

Can you guess what this picture shows?

 

 

The "thing" next to the fingernail is a functioning computer created at the University of Michigan (and it measures just .3 mm a side).   It's run by photovoltaics and is primarily used as a precision temperature sensor. The caveat is that once it loses power, it loses all prior programming and data.

It tests the limits of what we call a computer - but it's multitudes better than the previous iteration, and innovation breeds innovation. 

Exciting stuff!

Here Are Some Links For Your Weekly Reading - August 18th, 2019

Larry Kudlow confirmed that Trump wants to buy Greenland.

 

 

Here are some of the posts that caught my eye recently. Hope you find something interesting.

 

Lighter Links:

• MIT's New Interactive Machine Learning Prediction Tool Could Give Everyone AI Superpowers. (TechCrunch)
• Why You Need Innovation Capital and How to Get It. (HBR)
• The Myth of Rational Thinking. (Vox)
• The Hotel Hackers Are Hiding In The Remote Control Curtains. (Bloomberg)
• Watch the Meaning of Life: One of the Best Animated Short Films Ever Made Traces the Evolution Life, the Universe & Beyond. (OpenCulture)

 

Trading Links:

• Amazon's Most Lucrative Business is Headed to Space. (Quartz)
• Training a Single AI Model Can Emit as Much Carbon as Five Cars in Their Lifetimes. (TechReview)
• These Indicators Show Where You'll See the Eventual Recession Hit First. (Globe&Mail)
• Big Techs Raise Important Issues Globally beyond Traditional Financial Risks. (Forbes)
• We are Very Close to Peak Fintech, with More Than 10,000 Startups Jumping into the Boom. (Quartz)